Vacation Rentals 1,000 miles away from primary residence?
Realtor · Silver Spring, MD · Member since 2016 · 20 posts · 4 votes
Vacation Rentals 1,000 miles away from primary residence?
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Property Manager · Aurora, CO · Member since 2014 · 221 posts · 210 votes
9yI live in CO and have 2 rentals in the Panhandle of Florida (Fort Walton Beach.) They are condos in the same building.
When we were beginning our search to buy our first rental in FL we looked all up and down the Gulf coast of FL. I loved many of the cities we saw along the southern Gulf coast, but found most of them to be way out of our budget and a lot of them had rental restrictions that would have made it impossible for the property to pay for itself. (Example: limited to on rental per year, at least 30 days.)
We decide to purchase in Destin, which does not have any such rental restrictions. But even in Destin we were having a hard time finding a condo in a nice building that was directly on the beach, that had an amazing view and was within our budget. Our realtor took us over the Destin bridge to Okaloosa Island (which is part of the city of Fort Walton Beach) and that is where we found our first unit. It is in a small building (20 units) that sits right on the beach with a beautiful view. This condo was actually larger than any we had seen in Destin and it was well within our budget. We bought the first unit in 2014 and the second one last year.
The occupancy rate has been great; actually more than I expected. I assumed we would be able to rent the condo during the summer season and maybe secure a few snowbird bookings during the winter. It turns out that the condos rent well throughout the year. Our "slow" times are usually January (unless we are able to get a snowbird booking), November and December. Last year our occupancy rate was 78%.
As others have said the crucial thing is to have very good, reliable help on the ground. My housekeeper is great, I couldn't do this without her. I pay her more than she requested when I first interviewed her because I want her to value this relationship and I also pay her a bonus for every review that I receive that mentions how clean my units are.
It is also imperative to have very good maintenance contacts. The A/C in one of my units failed one September while it is still very hot. Even though the call came in on a Friday my contact was able to temporarily fix the AC the next day (Saturday) until they could install a new unit the next week. I gave those guests a refund for a couple of nights to compensate them for the inconvenience.
Things will always go wrong....plumbing issues, etc. But if you have good, reliable contacts in the area they can be handled as expediently as is possible and most guests understand that these things happen.
Best of luck to you with your new venture!
22 Replies
- Residential Real Estate Broker · Sedona, AZ · Member since 2017 · 754 posts · 504 votes9y
Before I was a realtor, I was a full time investor. I lived in Arizona and purchased in Arizona, Alabama and Florida. It can work (To invest 1000+ miles away), but you need to establish relationships (Property management, cleaners, etc) with trustworthy locals and stay informed and in touch. I also visited my investment areas every 3-6 months- but then again, I was flipping & renting a lot of homes.
- Realtor · Silver Spring, MD · Member since 2016 · 20 posts · 4 votes9y
@Chad McMahan oh nice! What parts of Florida did you purchase in? Were they SFH, Multi or Condos?
Although they have nice beach weather all year round, what did your vacancies look like if you don't mind me asking? Were you able to cash flow on these properties? Soo good to meet someone who's had this experience before! :-)
- Residential Real Estate Broker · Sedona, AZ · Member since 2017 · 754 posts · 504 votes9y
Jacksonville. They were SFH flips. Although most of my investing was in Southern Alabama and Northern Arizona
- Investor · Denver, CO · Member since 2016 · 533 posts · 433 votes9y
@Lily Ardila I have a homes in AZ and reside in Colorado. I don't use a mgmt company as I was able to find an excellent cleaning crew using the Nextdoor website (crazy but it worked). I also have a handyman for emergencies and have tracked down HVAC and plumbers that are reliable as well. One thing to make sure of is that whatever you buy is mechanically sound. Last thing you want is an A/C unit, Furnace, or Water Heater failing on a guest. Also, good reliable appliances are worth an extra few bucks to avoid costly repairs later. If I were local to my homes I wouldn't worry so much about these things, but since I'm remote I make sure to spend a little extra in the beginning to save later. I tend to venture their about every three - four months to check things out, so plan on doing so and factor that into your cost of operation. I have a good friend who has invested in the panhandle of Florida and knows that area very well. PM me and I can connect you with him as he is not on BP.
Mike
- 9yMike TerryPro MemberInvestor · Fort Myers, FL · Member since 2015 · 293 posts · 278 votes
Hi Lily,
My wife and I purchased a vacation home during the downturn in 2010. We live in North Carolina. We have rented it as a vacation property ever since. We lose money on that proposition every year, but it has been a good tax shelter and it has doubled in value. It ends up costing us about $5k a year in operating costs that are not covered by rent. Now we have not worked very hard at renting it out, I'm sure we could do better if we worked at it. We rent to the same couples each season. Problems renting is easy January to May hard the rest of the year. We got a house with a pool thought it was necessary for winter rentals, maintenance is an issue with pool it costs 70$ per month. We have great neighbors that look after it and a lady who cleans it after the renters leave. We are very fortunate to have great renters that take care of it like it is their own. I used to live on the east coast it is much more expensive, If your looking for more affordable areas try Fort Myers/Cape Coral. same house would be at least 100K more on the Atlantic side. If I can be of any help to you let me know.
I'm a fan of Florida's Atlantic Coast @Lily Ardila specifically the Space Coast, and I'd be happy to help if I can.
- Investor · Cincinnati, OH · Member since 2008 · 319 posts · 243 votes9y
Florida vacation rentals in many areas might be similar to MD. During the summer off season it gets hot and many of the markets are flooded with options. I do not own any properties but from the perspective of a renter it seemed like there is a lot of choice in the off season/a lot of vacancy.
In Florida, do vacation rentals have a better return than long term rentals?
- Property Manager · Aurora, CO · Member since 2014 · 221 posts · 210 votes9y
I live in CO and have 2 rentals in the Panhandle of Florida (Fort Walton Beach.) They are condos in the same building.
When we were beginning our search to buy our first rental in FL we looked all up and down the Gulf coast of FL. I loved many of the cities we saw along the southern Gulf coast, but found most of them to be way out of our budget and a lot of them had rental restrictions that would have made it impossible for the property to pay for itself. (Example: limited to on rental per year, at least 30 days.)
We decide to purchase in Destin, which does not have any such rental restrictions. But even in Destin we were having a hard time finding a condo in a nice building that was directly on the beach, that had an amazing view and was within our budget. Our realtor took us over the Destin bridge to Okaloosa Island (which is part of the city of Fort Walton Beach) and that is where we found our first unit. It is in a small building (20 units) that sits right on the beach with a beautiful view. This condo was actually larger than any we had seen in Destin and it was well within our budget. We bought the first unit in 2014 and the second one last year.
The occupancy rate has been great; actually more than I expected. I assumed we would be able to rent the condo during the summer season and maybe secure a few snowbird bookings during the winter. It turns out that the condos rent well throughout the year. Our "slow" times are usually January (unless we are able to get a snowbird booking), November and December. Last year our occupancy rate was 78%.
As others have said the crucial thing is to have very good, reliable help on the ground. My housekeeper is great, I couldn't do this without her. I pay her more than she requested when I first interviewed her because I want her to value this relationship and I also pay her a bonus for every review that I receive that mentions how clean my units are.
It is also imperative to have very good maintenance contacts. The A/C in one of my units failed one September while it is still very hot. Even though the call came in on a Friday my contact was able to temporarily fix the AC the next day (Saturday) until they could install a new unit the next week. I gave those guests a refund for a couple of nights to compensate them for the inconvenience.
Things will always go wrong....plumbing issues, etc. But if you have good, reliable contacts in the area they can be handled as expediently as is possible and most guests understand that these things happen.
Best of luck to you with your new venture!
Assuming your goal is to purchase this as a second home and rent to assist in covering the costs the likely hood is that it will not necessarily have positive cash flow. Buying for dual purpose expecting to make money is often a throw of the dice. Be prepared for this reality when trying to accomplish more than one goal with investing.
If it covers much of the costs be thankful, if it produces a profit as well you gambled and hit the jack pot. Which way it goes will be determined by your priority in buying. Rental income/investment or second home.
- 9yJohn PowellPro MemberReal Estate Agent · Kennesaw, GA · Member since 2015 · 308 posts · 153 votesIf anyone in the FWB/Destin area needs boots on the ground I live in Niceville, FL and am starting to look at getting a vacation rental in those markets. I'd be willing to add value to someone who is looking to get more experience in the vacation rental side. I currently own several long term rentals in several states looking to branch out to the vacation rental side here locally.
- 9yTony HightowerPro MemberRental Property Investor · Clarksville, Tenn · Member since 2017 · 72 posts · 34 votes
@John Powell, Is Niceville a profitable location for vacation/AirBnB. I worry most people want to be a little closer to the beach. I know it is only 5 minutes but i am not sure most would take a cost savings for a 5-10 minutes drive to beach.
- Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes9y
@Lily Ardila So maybe a few things to think about:
1.) Have you been prequalifed for a 10% down mortgage on a second home/income property? If so, great. If not, get prequalified so you don't go through analysis, due diligence, etc. just to figure out that the bank is going to want 25% down. And if you are looking at vacation rentals you'll want to see financials (if it's currently used as a vacation rentals) and it will be easier for your agent to obtain those with a prequal letter from a bank.
2.) I've never been able (personally) to make an ocean-front vacation rental in Gulf Shores or Destin pencil out. Why? The property management costs. You can try to do it yourself but it sounds like way too much hassle for me (personally). And to get a solid PM company you're probably looking at 25% of gross rents. That's a huge chunk right off of the top but one of the very few ways you can make a vacation rental even semi-passive.
3.) Properties that will give you the highest peak rents in the summer will often give you little throughout most of the winter. Why? Family vacation time is the summer. Homes where mom, dad, grandma, grandpa, kids, etc. can all sleep and split the costs command an almost a disproportionate premium. Fast-forward to the winter in places like Florida and you have snow birds coming down. Those snow birds (usually just two people) don't need 5 bedrooms, 5 bathrooms, and 3000+ square feet. And you could easily argue they don't even WANT it.
4.) Don't discount (underestimate) the amount of additional wear-and-tear you get being near the ocean. Salt water is not your friend. Just about everything wears out faster. If you're buying a property inland this doesn't really come into play but if you're buying ___ blocks from the water, it will.
5.) When you're close to the water you also end up with some crazy insurance premiums. Storms do hit the Gulf Coast, Florida, etc. pretty regularly and they are far from gentle. So you end up with property insurance, flood insurance, and (the favorite) wind/windstorm insurance. Again, maybe this doesn't apply it's you're ___ miles inland so your mileage may vary.
I know other people have made it work but I haven't been able to yet. The insurance and the property management fees just annihilate cash-flow. Even if there is positive cash-flow it's not enough to give me a solid ROI. With only 10% down and a 90% mortgage it's going to be even higher for you to get something that cash-flows thanks to the higher debt level. Again, others have made it work, others will continue to make it work, but don't be surprised if a lot of deals don't pencil out well.
- Investor · Destin, FL · Member since 2014 · 29 posts · 3 votes9yTony Hightower Niceville is a great town, but no one goes to niceville to vacation. Not close enough to the beaches. I am a licensed contractor in the area and flip a few properties a year. If anyone needs assistance, let me know.
- 9yJohn PowellPro MemberReal Estate Agent · Kennesaw, GA · Member since 2015 · 308 posts · 153 votesTony Hightower Niceville is not profitable for vacation at this point it. It is profitable for flips and buy and hold if you can find a deal. I'm looking to invest on Okaloosa Island or Destin for vacation rentals. I was just offering help to anyone who might need boots on the ground I can be in either in 20min so it would be easy to self-mange when I do invest.
Originally posted by @Tyler Weaver:
Florida vacation rentals in many areas might be similar to MD. During the summer off season it gets hot and many of the markets are flooded with options. I do not own any properties but from the perspective of a renter it seemed like there is a lot of choice in the off season/a lot of vacancy.
In Florida, do vacation rentals have a better return than long term rentals?
In my opinion, yes, with a caveat. Vacation rentals in popular vacation spots can earn much more than LTR in the same location but I don't think a seasonal VR can out-earn a LTR where the VR is only popular for one or two events a year.
To give you an idea of summer pace in a FL VR on the beach, here are bookings from some of my VRs, redacted for privacy:
It's a pretty active month so far across all booking engines, a few holes here and there but overall the summer hasn't impacted booking rates just yet but it IS different from a winter pattern where you'd see many more long term 30 day blocks.
- Gulf Breeze, FL · Member since 2017 · 11 posts · 0 votes9y
Originally posted by @Valerie Rogers:
I live in CO and have 2 rentals in the Panhandle of Florida (Fort Walton Beach.) They are condos in the same building.
When we were beginning our search to buy our first rental in FL we looked all up and down the Gulf coast of FL.
Hello Valerie! I was considering doing exactly what you are talking about here. I was hoping to maybe get a little insight from you on your experience with your two rental condos. I visited the area for a few weeks and I decided I was going to move there. That was a little over two years ago now! I will be back in the country soon and I am itching to get started in real estate investing. If you need anything at either of your places I would be more then happy to lend a hand upon my return. Looking forward to hearing from you!
- Property Manager · Aurora, CO · Member since 2014 · 221 posts · 210 votes9y
Hello Clinton, nice to "meet" you. I'm happy to help. What would you like to know about my condos in FL that I haven't already shared?
Valerie
- Gulf Breeze, FL · Member since 2017 · 11 posts · 0 votes9y
- Gulf Breeze, FL · Member since 2017 · 11 posts · 0 votes9y
Originally posted by @Valerie Rogers:
Hello Clinton, nice to "meet" you. I'm happy to help. What would you like to know about my condos in FL that I haven't already shared?
First, your comment was very informative, thank you. In short I would like to know everything. I am very detail oriented and have a lot of questions though I know your time is valuable! If I could only ask a few questions I would start with is the team that you assembled on Okaloosa Island a group of individuals or is it a company, and are they available to network and possibly take on additional condos? It sounds like they do great work. Second, on your page I saw you had a career with VRBO and you have a passion for vacation rentals. I am interested to see the service you created in regards to marketing and booking. And lastly what methods do you use to book your condos on the Island (do you stick to one site) and is what your short term tenants sign similar to a lease for a long term rental?
- Property Manager · Aurora, CO · Member since 2014 · 221 posts · 210 votes9y
Hi Clinton,
I have an individual who is my housekeeper and we've made contacts with various vendors in the area such as plumbers (we use Emerald Bay Plumbing), Heating/AC company (we use JeffCo), etc.
If you'd like more information about my marketing & booking service please view my profile for the link to my website or send me a PM.
Most of my bookings come from VRBO/Homeaway. I also advertise on Airbnb and TripAdvisor, but only receive a handful of bookings from those sites.
I do have a rental agreement that I've developed over the course of the years that I've been renting my properties. But you can view "Sample" rental agreements on the "Community from Homeaway" (Homeaway's forum for VR owners and travelers.) Just type "Sample Rental Agreement" in the search field and you should find a post with a downloadable document.
Best wishes!
Valerie
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